Executive Cases: Interviews with Senior Executives of Early-Stage Companies:
TaKaDu – Israel
Prepared by George Foster and Sandy Plunkett
TaKaDu is the global leader in water network monitoring, providing a platform for water utilities looking to reduce costs and increase efficiency. The company was established in 2009 by Amir Peleg, its founder and CEO, with the vision to enable water utilities to monitor their networks remotely (cloud-based solution) using data-driven technologies, similar to the common practices for managing other types of networks (e.g. IT, telecom).
TaKaDu’s patented cloud solution converts existing network data which measures, in real time, parameters like flow and pressure into real-time insights and alerts about network inefficiencies using sophisticated statistical algorithms and a simple-to-operate web application to allow early detection, better operation and more efficient management.
The TaKaDu solution is in daily operational use by leading water utilities worldwide, from Australia through Europe, to Latin America. The company is a founding member of the Smart Water Networks (SWAN) Forum and the winner of many industry awards, including the prestigious Technology Pioneer Award from the World Economic Forum.
Q1: What was the source of the initial idea, and how did that idea evolve into a viable growing company? How did it change over time?
Peleg: “After selling my previous venture to Microsoft, I was eager to do something with significant environmental impact in the clean tech space as a future growing sector. I started studying the water sector, and was exposed to some disturbing facts about global water loss. Apparently, about 25-30% of water is being lost along the distribution network, mainly due to leakage. Being Israeli, with a high level of awareness of water scarcity, I decided that this would be my next challenge.
Coming from an IT and communications background, I was familiar with other types of networks, where visibility is much more advanced, and realized that there is no reason why water network operators can’t enjoy the same benefits of visibility and decision support. I decided to bring high-tech approaches into the perceived low-tech water sector. This way of thinking, together with a market needs assessment showing a huge need and growing demand (growing gap between the supply of and demand for water), led to the decision to establish TaKaDu.
I then contacted my ‘mathematical genius’ friends asking them to come up with a new technology to address this problem. Tackling the same problem while coming from a completely different background (statistics and mathematics rather than hydraulics) was a great advantage, allowing us to develop an “out of the box” solution to eliminate the guess work of water network operators.”
Tamir: “After becoming operational, working with various customers of different sizes and across multiple countries, and learning more about the market needs and common practices, we added more features and capabilities to improve our offering: expanding to more users and providing greater benefits. The combination of multiple types of data and a unique data fusion approach allowed us to develop a real practical solution for a problem that had not been appropriately addressed before then.”
Q2: What were the major growth accelerators for your company in the early years of high growth?
Tamir: “I would split it into two key drivers: the first is market need, which is huge and global, especially when considering the inadequate level of innovation in this field over the past few decades; the second is the TaKaDu cloud service business model, which, being a based on OPEX with clear ROI rather than a big capital project, complies with the challenges in this specific market and helps us overcome the key barriers as a vendor for water utilities.
There is an enormous and growing global need for solutions to make water supply sustainable. As an indication, in its Global Risks Report 2013, the World Economic Forum ranked ‘water supply crises’ second out of 50 risks in terms of impact. Insufficient water supply can trigger food shortages, demographic changes, political strife and even armed conflict.
On the practical level, while the demand for water is continuously growing, more water is wasted through leakage as water infrastructure ages and deteriorates. Water utilities worldwide suffer from a deteriorating infrastructure in drastic need of capital. This forms a great opportunity for technologies that provide superior operational performance at lower costs. This is one of the key growth drivers for TaKaDu, which, by using a software-as-a-service (SaaS) delivery model, helps water utilities to increase their operational efficiency while involving no upfront investment or capital cost.”
Q3: What role did key aspects of the entrepreneurial ecosystem surrounding your company play in the growth of your company?
Peleg: “Initiating a venture in the water sector is more complex than doing it in other fields like Internet, communications or IT. Venture capitalists are more reluctant as the water market is considered conservative and slow moving. As a serial entrepreneur, I had some advantages – I was familiar with the process, knew what needs to be done and had the right connections. The reputation I gained from my previous projects, combined with the ability to finance the early stage (seed investment) myself also facilitated the process.
The geographical location also played a role in the initial stages of the company. Seeking investors for the first funding round, we benefited from the developed venture capital community and investment industry (lawyers, certified public accountants) in Israel. In addition, being based in Israel, with a strong personal network, it was relatively easy to find top-notch researchers and developers to join the venture and develop the solution.
Moreover, specifically when it comes to water technologies, the Israeli Government widely supports the Israeli water industry and especially exporters in this field. We have benefited, and still do, from special programmes developed by the government to support marketing and business development activities opening doors to Israeli companies worldwide.”
Q4: What key aspects of the entrepreneurial ecosystem surrounding your company that were absent (or existed only in a weak form) created the greatest challenges for growing your company? Please describe and discuss how you met/were impacted by these gaps in the ecosystem and their resultant challenges?
Peleg: “One of the most significant challenges for any entrepreneur is gaining the first set of customers. This is even more challenging when you are in the water business – early adopters within the water sector are hard to find. Most water utilities are conservative and risk-averse and local references from the same country are always needed, which means that getting the foot in the door in each territory is a complex task requiring high investment. We address this challenge by first identifying markets with high awareness to water scarcity issues, spotting the few early adopters that do exist in those territories and approaching them, as well as leveraging well-known customers that can serve as good references for others.”
Tamir: “I agree with Amir’s assessment of the absence of early adopters. I would add that since the TaKaDu solution makes use of readings from network sensors and meters, our primary target market is comprised of utilities that already have those sensors in place. Although we see a global trend of water utilities becoming more data-driven, it appears that many water utilities are still way behind in terms of the implementation of advanced technologies for managing their distribution networks and do not have the basic instrumentation required for working with TaKaDu. Although this is a major challenge, it is not a limiting factor in the short term as there are currently enough utilities which do have the required instrumentation and are in a position to add value by working with TaKaDu. These are typically the ‘early adopters’ we referred to earlier. Looking at the longer term, this is not a concern at all, as there is no doubt that water utilities worldwide are moving in this direction, hence the overall potential is constantly growing.
A different channel that helps us address those challenges is our global network of partners. TaKaDu partners with a range of well-known resellers (from local professional companies to large international corporates) that represent us internationally, reducing the level of reluctance from the customer side. The most significant partnership is with TaKaDu’s strategic partner ABB, which also led a US$ 6 million funding round for TaKaDu in April 2012. The partnership with ABB as well as with other resellers of TaKaDu who are also selling network measurement instrumentation, creates opportunities by bringing companies to a level where they are technically ready for TaKaDu, thereby increasing TaKaDu’s addressable market.”
Q5: At what stage did you invest significant resources seeking to grow your company internationally/beyond your domestic country or region? What factors were pivotal in deciding when to seek growth internationally and where to seek that growth?
Peleg: “We have been seeking international growth from day one. The Israeli market is very small and limited, and doesn’t hold a great amount of potential for TaKaDu. This is typical for most new Israeli ventures who think globally from the start.
When first starting the company, we approached a large water utility in the UK which is considered a leading water supplier worldwide. We started with the UK as it is known to be very advanced and is a leader in the international water community. Other countries usually follow the UK so success there can be relatively easily translated into success in other parts of the world.”
Tamir: “Very soon after that, we decided to expand to other countries and selected them based on several key performance indicators such as the total market potential in the country, the level of adoption of advanced technologies, and the expected ROI when buying TaKaDu (based on indicators like water loss, energy consumption and potential savings). This is how we chose to focus our efforts in Australia for example, as well as other markets like Spain and Portugal.
Since TaKaDu’s offering is a software-as-a-service solution, and since we sell it to end customers through local partners, working with customers in different geographies is relatively easy and not as cost-intensive as it may be for other businesses.”
Q6: What were the biggest challenges in building growth internationally? How did you meet or adapt to those challenges?
Peleg: “As the creator of a new market category, the biggest challenge for us was, and actually still is, market education. TaKaDu introduced a revolutionary approach and a whole new layer in operational decision support – using existing network data to increase network visibility and allowing operators to take control of their network, all of which is done in the cloud. As mentioned earlier, the water industry is very conservative, which, given that ours is such an innovative solution, presents a huge challenge. From day one of the company, we invested a lot of effort in market education and building trust and awareness – that included writing articles and participating in leading conferences, pitching the new approach, producing white papers and educational material, collaborating with partners that could support these extensive market education efforts and initiating the SWAN Forum together with global leading players like Schneider Electric in 2011 to educate the market on data-driven technologies and smart water networks in general.”
Q7: What major role, if any, did key aspects of the ecosystem in the country (or countries) you first sought international growth either promote or impede your ability to grow in those international markets?
Peleg: “Let’s take the Australian market as an example. The Australian water utilities are very advanced, which means that the ecosystem there is quite mature, which has advantages and disadvantages. The down side was the presence of competitors – even though not direct competitors, we found ourselves competing with other innovative solutions on resources and attention. In many cases, these were solutions developed in-house by the water utilities themselves which made us face the ‘not invented here’ barrier. Additionally, since the Australian water market is known for being a good market to start with, many vendors of advanced solutions try to penetrate this market and end up fighting over the same budgets.
On the other hand, owing to the highly developed nature of the ecosystem in Australia, there were many platforms and tools in place enabling us to present our solution to the relevant stakeholders. For example, there were local industry events specific to data-driven solutions for utilities or water loss reduction or special seminars dedicated to innovation. These are things that you could only dream of in other countries. Moreover, the water community in Australia is relatively small with a limited number of large utilities – this typically promotes growth as success with one customer leads to other potential customers willing to adopt the technology.”
Q8: Seeking international growth often has both high moments and dark (low) moments. Briefly describe one high moment and one dark (low) moment in seeking international growth.
Peleg: “As you can imagine, there have been many achievements resulting in high moments alongside many challenges and disappointments. One of the darkest moments I remember was realizing that many of the UK water utilities, which have developed their own in-house solutions over the years, are less tempted to try a new approach, practically delaying our entry to the UK market by a few years.
“By contrast, an important high moment was when we were first exposed to the Australian market while being introduced to the great leadership of Yarra Valley Water in Melbourne. At that exact moment we realized how promising the Aussie market was for us. It had all the required ingredients for TaKaDu’s success – high awareness of water issues, utilities seeking new innovative solutions, a strong regulator, and more. In our case, the geographic distance of this market from Israel did not pose a major barrier and was easy to overcome since we sell a remote cloud-based solution.”